Years ago, I found myself sitting in law school in Moot Court wearing an oversized itchy blue suit. It was a horrible experience. In a desperate attempt to avoid anything like that in the future I enrolled in a tax course. I loved it. I signed up for another. Before I knew it, in addition to my JD, I had a LL.M Taxation. I needed only to don my cape…. taxgirl® was born. Today, I live and work in Philadelphia, PA, one of the best cities in the world (I can't even complain about the sports teams these days). I landed in the City of Brotherly Love by way of Temple University School of Law. While at law school, I interned at the estates attorney division of the IRS. At IRS, I participated in the review and audit of federal estate tax returns. I even took the lead on a successful audit. At audit, opposing counsel read my report, looked at his file and said, “Gentlemen, she’s exactly right.” I nearly fainted. It was a short jump from there to practicing, teaching, writing and breathing tax.

Taxes From A To Z (2013): J Is For Junk Fees

If you’ve ever bought or sold a home, you’ve probably seen a laundry list of fees on your sale or mortgage papers. These fees, usually found at the bottom, are in addition to notary fees and appraisal fees, and are sometimes called “junk fees.” While a specific fee may be necessary depending on your circumstances, most often they are included to boost profitability of the lender and are almost always redundant and disproportionately inflated.

Junk fees can include:

Administration fee

Application fee

Commitment fee

Credit report

Document preparation fee

Document review fee

Mail fee

Postage fee

Reconveyance verification fee

Tax service

Underwriting fee

Warehousing fee

Wire transfer fee

These fees can add up pretty quickly. In some instances, you can negotiate them away – or at least reduce the total fees payable – but chances are, you’ll have to pay something.

Sadly, you get bitten twice on these fees. Once when you pay them and again when you realize that you can’t deduct them. While you can generally deduct interest payments and discount points (pre-paid interest) on a qualifying home mortgage if you itemize, you may not deduct processing fees as deductible expenses. And no cheating: you cannot simply recharacterize amounts that are ordinarily stated separately on the settlement statement, such as administrative fees and application fees, as points and take the deduction. Points or fees charged for specific services are not interest and cannot be deducted.

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